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Which two ratios do you think should be of greatest interest ineach of the...

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Accounting

Which two ratios do you think should be of greatest interest ineach of the following cases?

a. A pension fund considering the purchase of 20-year bonds.

b. A bank contemplating a short-term loan to a customer.

c. A common stockholder.

Answer & Explanation Solved by verified expert
3.7 Ratings (412 Votes)
Ans Following ratio should be used of greatest interest in each of the following cases A pension fund considering the purchase of 20year bonds Used Price Ratios Bond Equity Earnings Yield Ratio The bond equity earnings yield ratio BEER is a metric used to evaluate the relationship between bond yields and earnings yields in the stock market How to Calculate BEER BEER is calculated by dividing the yield of a government bond by the current earnings yield of a stock benchmark in the same market The current earnings yield of the stock market or simply an individual stock is just the inverse of the pricetoearnings PE ratio that is earningsprice The earnings yield is quoted as a percentage which measures the percentage of each dollar invested that was earned by a company sector or the whole market during the past twelve months For example if the PE ratio of the SP 500 is 25 then the earnings yield is 125 004 It is easier to compare the earnings yield to bond yields than to compare the PE ratio to bond yields What Does BEER Tell You The theory behind    See Answer
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In: AccountingWhich two ratios do you think should be of greatest interest ineach of the following...Which two ratios do you think should be of greatest interest ineach of the following cases?a. A pension fund considering the purchase of 20-year bonds.b. A bank contemplating a short-term loan to a customer.c. A common stockholder.

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